Chris Ciovacco

About the Author Chris Ciovacco

Chris Ciovacco is the founder and CEO of Ciovacco Capital Management (CCM), an independent money management firm serving individual investors nationwide. The thoroughly researched and backtested CCM Market Model answers these important questions: (1) How much should we allocate to risk assets?, (2) How much should we allocate to conservative assets?, (3) What are the most attractive risk assets?, and (4) What are the most attractive conservative assets? Chris is an expert in identifying the best ETFs from a wide variety of asset classes, including stocks, bonds, commodities, and precious metals. The CCM Market Model compares over 130 different ETFs to identify the most attractive risk-reward opportunities. Chris graduated summa cum laude from The Georgia Institute of Technology with a co-operative degree in Industrial and Systems Engineering. Prior to founding Ciovacco Capital Management in 1999, Mr. Ciovacco worked as a Financial Advisor for Morgan Stanley in Atlanta for five years earning a strong reputation for his independent research and high integrity. While at Georgia Tech, he gained valuable experience working as a co-op for IBM (1985-1990). During his time with Morgan Stanley, Chris received extensive training which included extended stays in NYC at the World Trade Center. His areas of expertise include technical analysis and market model development. CCM’s popular weekly technical analysis videos on YouTube have been viewed over 700,000 times. Chris’ years of experience and research led to the creation of the thoroughly backtested CCM Market Model, which serves as the foundation for the management of separate accounts for individuals and businesses.

Is The S&P 500’s 200-Day Providing Some Insight?

Long-Term Trend

The S&P 500’s 200-day moving average is commonly used to track long-term trends. All things being equal, the stock market bulls prefer the S&P 500 to remain above the 200-day. The bears are more content when price drops and stays below the 200-day. As shown in the 2015 chart below, the S&P 500 has printed twelve consecutive daily closes above its 200-day moving average. From a historical perspective, do rallies typically fail or succeed after twelve consecutive closes above the 200-day?

1990 – The Rally Continued

There are not too many historical cases in the last 30 years that featured a significant drop below the 200-day (7% to 19%) followed by a rally back above the 200-day. One case that fits the profile is 1990.

What happened after the twelfth consecutive close? Stocks tacked on an additional 33% between point A and point B.

1998 – The Rally Continued

In 1998, the S&P 500 slashed through its 200-day moving average, formed a double bottom, and then rallied back above its 200-day moving average for twelve consecutive sessions, which is similar to what we have seen in 2015.

What happened after the twelfth consecutive close in 1998? Stocks tacked on an additional 25% between point A and point B.

Does The Bigger Picture Have Bullish Characteristics?

This week’s stock market video takes a broader look at the market’s risk-reward profile.

2010 – The Rally Continued

After the 2010 “flash crash” correction, the S&P 500 was unable to post twelve consecutive daily closes above its 200-day moving average until mid-September.

What happened after the twelfth consecutive close in 2010? Stocks tacked on an additional 17% between point A and point B.

2011 – The Rally Continued

Calendar year 2011 saw numerous events that were similar to 2015; a consolidation period, a sharp plunge, a double bottom, and a rally back above the 200-day moving average. The twelfth consecutive daily close above the 200-day did not occur until early 2012.

What happened after the twelfth consecutive close in 2012? Stocks tacked on an additional 8% between point A and point B.

How Can We Use This?

Does history tell us what is going to happen in late 2015/early 2016? No, history can only speak to probabilities. In each of the historical cases above, once the S&P 500 posted twelve consecutive daily closes above its 200-day moving average, the rally continued and tacked on significant gains.

What About 1987?

1987 has some similarities and could be included in this analysis. We decided to omit it for two reasons: (1) the S&P 500 stayed below its 200-day moving average for seven months, which is quite a bit different than 2015 (two months), and (2) the negative slope of the 200-day was significantly steeper (more bearish) in 1987.